Howdy Ags,

I help run the books for a medium sized construction subcontractor in the SW Houston area. Over the last two years we've slowly crept up in revenue from 11M FY2022 to 18M FY2025. We're a small office (~12 office personnel) and we're starting to feel to crunch internally. We've recently taken on some local Houston investors and PE Firm. We're all anticipating our roles to look drastically different in the next 12-18 months as we expand. Personally, I'm looking at stepping into a more official CFO type of role if this all shakes out positively.

My background stems from 10+ years in the O&G market, construction financing is *relatively* new to me. I've been in this market since Jan 2022 now.

We're expecting a first sit down with some of these investors this Friday 19th. If anyone could share some advice publicly or through DM, I'd great appreciate it.

Advice specific to the CFO role...

Your budgets should be bottom up, defensible and withstand audit scrutiny. The better the budget, the easier revenue recognition will be.

Go find a killer subcontractor agreement. Spend thousands if you need to have one written...it could save you millions.

PE firm won't care if you stand behind your word and your handshake is as good as gold and you expect the same from your subs. Get a killer subcontract agreement.

Track contract deviations and issue change orders like your business depended on it, it does.

If it's not obviously in scope, it's a change order. Have deadlines for your subs to submit change orders that are tight...10 days or they waive the right.

As the poster above says, go look at debt options before committing to PE. No harm in talking to the PE guys, but they like to layer debt when they buy into an existing business with revenue.

Also, ask the PE guys if they have any similar investments and go talk to those management teams. It's rare to hear a management team speak highly of their PE sponsor if they're being candid.

No matter how PE presents themselves, they're sharks, so just remember that when making a deal with them.

I would definitely look at debt over equity. Heck, I would even look at lending against your billings (since I know a few shops in Texas work a lot with construction billing lending) instead of PE. I would only do PE if the valuation is super attractive and it feels like it would be significantly accretive. You have no clue how bad the due diligence is going to get when you go down this road.

TxAg20 said:

---

As the poster above says, go look at debt options before committing to PE. No harm in talking to the PE guys, but they like to layer debt when they buy into an existing business with revenue.

Also, ask the PE guys if they have any similar investments and go talk to those management teams. It's rare to hear a management team speak highly of their PE sponsor if they're being candid.

No matter how PE presents themselves, they're sharks, so just remember that when making a deal with them.

---

As I was reading through the posts prior to yours, one thought kept coming to mind. And it involved the PE folks smelling blood in the water, aka sharks. They are not your friends. How bad it goes is dependent on who is involved, the way that PE group works.

Very good advice to talk to other firms that have had dealings with the PE group.